Was the great financial crisis caused by greedy and reckless bankers and Wall Street players or by a broad range of individuals, financial institutions and governments who became less risk-averse and prudent or by government housing policies that brought on the housing bubble and mismanaged the risks? The lame-duck Congress now in session is about to make some major decisions on spending and taxes — when all too many members still are operating on the idea that greedy bankers and Wall Street players, rather than government housing policies, are the problem.

Without waiting for the evidence, many in the political class, and particularly those on the left, immediately bought into the argument that the financial crisis was caused by greed. This view of the cause provided much of the political energy behind the passage this year of the Dodd-Frank Act, also known as the financial reform act. Somewhat more sophisticated observers have claimed that all of the actors in the financial system are implicated. Peter J. Wallison, a former general counsel of the U.S. Treasury and now a fellow at the American Enterprise Institute (AEI), debunks these arguments and conclusively shows in a study that those were primarily government housing policies that caused the crisis. Mr. Wallison summarized the arguments of the collective responsibility/guilt crowd as follows:

• Wall Street did not put into place sound risk-management processes.

• Government regulators did not properly or effectively oversee these processes or the banks, investment banks, and Fannie Mae and Freddie Mac.

• The rating agencies' models were flawed and the agencies themselves had conflicts of interest, allowing complex and ultimately toxic instruments to be released into the financial market.

All of the above-mentioned factors probably played some small part in the financial crisis, but greed and incompetence have always been with us, and so it is hard to believe that suddenly these factors combined to create the perfect financial storm. Brookings Institution scholars Martin Neil Baily and Douglas J. Elliott have argued that the quarter-century of record prosperity from 1982 to 2007 caused all of the financial players to become less risk-averse, and hence less prudent. Perhaps, but Mr. Wallison has set forth in the AEI October-November 2010 issue of Financial Services Outlook a much stronger and empirically based explanation for the financial meltdown.

Mr. Wallison argues that the housing bubble, driven by U.S. government policy to increase homeownership, is the primary cause of the financial crisis. He notes: "The most recent bubble involved increases in real (not nominal) home prices of 80 percent over 10 years, while the earlier ones involved increases of about 10 percent before they deflated." Starting in the late 1990s, the government, as a social policy to boost homeownership, required Fannie Mae and Freddie Mac to acquire increasing numbers of "affordable" housing loans. (An "affordable loan" is made to people who normally would not qualify.) By 2007, 55 percent of all loans made by Fannie and Freddie had to be "affordable." By June 2008, there were 27 million subprime housing loans outstanding (19.2 million of them directly owed by government or government-sponsored agencies), with an unpaid principal amount of $4.6 trillion. By the middle of this year, foreclosure starts jumped to a record 5 percent, four times higher than any previous housing bubble.

Mr. Wallison concludes his argument: "What we know is that almost 50 percent of all mortgages outstanding in the United States in 2008 were subprime or otherwise deficient and high-risk loans. The fact that two-thirds of these mortgages were on the balance sheets of government agencies, or firms required to buy them by government regulations, is irrefutable evidence that the government's housing policies were responsible for most of the weak mortgages that became delinquent and defaulted in unprecedented numbers when the housing bubble collapsed." The tragedy is that the financial crisis continues because Congress misdiagnosed the problem and came up with a 2,000-page "solution" that will only make matters worse.

Despite the well-known problems with Fannie and Freddie, they were ignored in the Dodd-Frank Act. Why? Because many members of Congress had conflicts of interest in that Fannie and Freddie were very large contributors to the political campaigns of numerous members. More direct conflicts of interest, by Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd and House Financial Services Committee Chairman Barney Frank, were well publicized, forcing Mr. Dodd to retire and causing Mr. Frank to loan personal money to his own re-election campaign.

The numbers show that government policies (including actions by the Fed), not greedy bankers, caused the financial meltdown. As long as the government continues to force its agencies and private parties to give housing loans to those who cannot afford them, taxpayers will be on the hook for hundreds of billions of dollars in additional debt. But Washington is still in denial, from the president to the bureaucrats, including those at the Federal Reserve and, most of all, members of Congress — including, of course, the notorious Barney Frank, Charlie Rangel, Maxine Waters and Nancy Pelosi, all of whom won re-election rather than jail terms.

By Morris PannerFriday, November 19, 2010As a Democrat whose politics are undeniably liberal on social issues, I lamented the outcome of the midterm elections. But as an entrepreneur with two software start-ups under my belt, I couldn't help but celebrate - and more than a little. As the fall campaigns wore on, I had found myself listening closely to the Tea Party, nursing the hope that its message would push both major parties to change the way they do business.

To understand my motivation, pick up the November issue of Washingtonian magazine. The annual Salary Survey notes on Page 81 that top trade association leaders (industry lobbyists) make multimillion-dollar salaries to "keep tabs on what the federal government was doing or might do."

These outsize earnings are symptomatic of a disease that is slowly killing the American economy. We are creating so much regulation - over tax policy, health care, financial activity - that smart people have figured out that they can get rich faster and more easily by manipulating rules on behalf of existing corporations than by creating net new activity and wealth. Gamesmanship pays better than entrepreneurship.

It is always hard to start a business. It is especially hard to start an innovative business, one that will foster a new technology or business method. Incumbent players in a market have an inherent advantage: Momentum counts for a lot, and it takes tremendous effort to get customers comfortable with a new product - or even to hear about it in the first place.

Given the difficulty of starting a company from scratch, and how economic activity is generated today, you can start to see why, if you were a rational market actor, you would be trying to get a piece of the government action.

The combined expenditures of federal, state and local government are rapidly taking over our economy. At the beginning of President Obama's term, government spending made up 35 percent of gross domestic product. Now, it is up to almost 45 percent, which puts us seventh among advanced economies.

And the Obama administration's new regulatory initiatives make this considerably worse in subtle ways.

The two largest pieces of legislation enacted in the past two years - health care and financial reform - are very vague. Take the new Consumer Financial Protection Bureau. It has a broad mandate to protect us from financial abuse, but when it comes to the actual implementation, the Brookings Institution wrote that unelected regulators will decide "almost everything" about how the organization works.

This is highly dangerous to innovation, which depends on clear and transparent rules. The more complexity, the more incumbents are favored. They have the capital to participate in complicated regulatory proceedings. They can hire high-priced lobbyists to present facts in a light most favorable to them. The more incumbents are favored, the harder it is for new companies to gain traction.

For a preview of what a complex regulatory process looks like, consider our tax system. The World Bank ranks the United States 62nd in the world in terms of how easy it is to pay taxes - and with a 16,000-page tax code, this is no surprise. In 2009 and 2010, Capital Tax Partners, a leading lobbyist representing Goldman Sachs, Apple and others, earned about $20 million in fees, according to the Center for Responsive Politics.

So, what is to be done?

From an entrepreneur's perspective, we need a national campaign to create transparency in our legislation and a national moratorium on the creation of commissions, regulators and czars. It is time for Congress to do the hard job of saying what lawmakers mean in clear and easy-to-understand language.

It is also fair to hold our leaders to a standard of transparency. We should reject bills that are thousands of pages or that delegate vast authority to unelected regulators.

Entrepreneurs are in an unusual situation. We are staunchly pro-business, believing that new ideas properly implemented can change the world.

Yet we are hardly represented by the business lobbying interests in Washington. Like most Americans, I recoil at the fact that the man who runs the U.S. Chamber of Commerce earns about $3.9 million a year. He doesn't represent me.

The next two years will be a critical time to see whether all the promises of a more transparent America are realized. If not, maybe it is time to create an entrepreneurs party, where wealth and value creation are prized above rule manipulation and influence peddling.

The writer is chief executive of TownFlier, a software company dedicated to improving digital communication and collaboration.

Government Strangles High-Tech GrowthPublished on August 28, 2010 by Ernest Istook

The CEO of Intel has joined the ranks of those labeling big government as the cause of our economic slump, not the solution.Paul Otellini says it already costs Intel an extra billion dollars to build a microchip plant in the U.S., rather than overseas. In his illustration, it's an extra 25% to create a $4 billion facility.He told this to an Aspen gathering of the Technology Policy Institute, adding that government is killing America's leadership for jobs of tomorrow. Otellini said, "We seemed a generation ahead of the rest of the world in information technology. That simply is no longer the case."While promoting education, research, favorable trade policies, and broadband expansion, he made it clear that tax policies are key--policies that are the opposite of what Congress and the Obama Administration are promoting:As CNET reported on his speech, "Take factories. 'I can tell you definitively that it costs costs1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States,' Otellini said. The rub: Ninety percent of that additional cost of a $4 billion factory is not labor but the cost to comply with taxes and regulations that other nations don't impose."How do we get companies to expand in America rather than overseas? The Intel CEO explained, "Adjust the U.S. corporate tax rate to a rate that is competitive world-wide. At Intel, we generate 75% of our revenue and much of our profit abroad. The U.S. tax treatment of that income makes it extremely expensive to repatriate that profit and invest here. If our tax rate approached the rest of the world, corporations would have a natural incentive to invest here given many of the natural advantages that exist in this country."He suggested lowering the rate to 25%. That reduction echoes a Heritage Foundation proposal in its "Solutions for America," which recommends, "The U.S. corporate tax rate should be set at or below the Organisation for Economic Co-operation and Development average of 26% to eliminate the incentive to move businesses and jobs overseas."Otellini also stressed the need not to penalize companies when they repatriate their foreign earnings and bring them back to the U.S. He's joined by many others in the high-tech community who warn that what some call "closing tax loopholes" actually hurts the ability to create jobs in America. Sybase CEO John Chen has written, "President Barack Obama has proposed to raise taxes on the international operations of U.S. businesses. There is one thing the proposal can effectively achieve: make the United States an even less friendly place to do business, and thus delay the economic recovery. . . . Although intended to keep investments and jobs from leaving our country, in the long run the measures in the proposal will drive investments away, and kill jobs in the U.S."The high-tech sector's complaints are part of a growing chorus from job creators who describe how Washington is smothering economic growth.The Business Roundtable sent a 50-page letter to the White House describing how Obama's agenda is stifling growth and killing jobs. A GOP letter complained of 191 intended rules and regulations that EACH would impose $100-million or more of growth-killing cost burdens on businesses.Worried about what their own government is doing to them, businesses continue to sit on a $1.8-trillion cash stockpile, holding it back for the extra costs they face from more taxes and more regulation.The White House happy talk of a "Recovery Summer" grates like nails on a blackboard. That rhetoric collapses with news that second quarter growth was at a 1.6% annual rate--less than half the first quarter rate and well below original White House numbers.To put America back to work, it's time to heed those who create jobs, rather than politicians who create more government. Intel and others should not face a $1-billion hurdle to expanding in the USA instead of overseas.Former Congressman Ernest Istook is a distinguished fellow at The Heritage Foundation.

As long as we have a large proportion of the "little guys" voting themselves benefits from the treasury those of us who pay for this have apparantly no rights. Obama is for the "little guy". Yet taxpayers like myself seem to have no say, no rights, are constantly being hounded about helping out and on and on and on.

**** Small-Biz Killers: Who Pays for Jobless Benefits?

By Michelle Malkin

http://www.JewishWorldReview.com | There is no such thing as a "free" government benefit. Ask small-business owners who are footing skyrocketing bills for bottomless jobless benefits. While politicians in Washington negotiate a deal to provide welcome temporary payroll, income and estate tax relief to America's workers, struggling employers wonder how long they'll have to pay for the compassion of others — and whether they can survive.

The Beltway deal hinges on extending federal unemployment insurance for another 13 months. This would mark the sixth time that the deadline has been extended since June 2008.

State unemployment benefits last up to 26 weeks. Bipartisan-supported Washington mandates have raised that to 99 weeks. The current proposal would raise the total to 155 weeks. The cost of the joint federal-state program is borne by employers who pay state and federal taxes on a portion of wages paid to each employee in a calendar year. (At the federal level, employers must pay 6.2 percent of the first $7,000 of income to keep the system afloat.)

The combined burden of these hidden state and federal payroll taxes has exploded during the recession as President Obama's economic recovery interventions backfire and the jobless rate remains stuck near double-digits. State unemployment insurance funds have gone broke in nearly half the states. As of April 2010, unemployment tax analyst Douglas Holmes testified before the Senate, 35 states and jurisdictions had unemployment fund-related debts worth $39.5 billion. Anti-fraud efforts to prevent scams and overpayments are woefully underfunded.

In an interminable money shuffle, these bankrupt state unemployment insurance funds are now borrowing money from the feds, whose own regular unemployment benefits account and extended benefits account are both in the red. Washington is relying on transfers from the federal general revenue fund to cover loan obligations related to all these hemorrhaging accounts.

Who pays? Dentists, tavern owners, maid services, mom-and-pop shops — small businesses that are the backbone of the American economy. In my home state of Colorado, small and mid-size firms have been saddled with eye-popping unemployment insurance bills that have doubled, tripled and more in the past year. The businesses that have the lowest claims histories are getting punished the most to make up the jobless benefits fund deficit.

Greg Howard, owner of McCabe's Tavern in Colorado Springs, told the Colorado Springs Gazette his bill spiked a whopping 600 percent. "It's enough to T you off a little bit," Howard told the newspaper. "The dollar amount isn't tremendous, but it's going up six times."_

A small commercial painting contractor told me this week that her nine-person company's 1st quarter UI bill has gone from $1,000 to more than $6,500 over the past three years. "It's killing us!" she told me. "How can we hire additional employees? This is a big increase in addition to the health insurance annual increases, etc. We had to reduce our employees' wages by 10 percent this year, and who knows when we will be able to bump them back up?"

Lon Gibson, owner of Legalpool, Inc., told me how perverse unemployment insurance incentives led him to shut down his business in Philadelphia:

"We placed legal staff, especially temporary secretaries and paralegals. Part of our business was to place a secretary at a law firm for a short period of time. … Invariably, however, the temp would apply for unemployment benefits after the assignment. The agency would make a profit of $6 to $10 an hour from the assignment. Later, the bill would come in from unemployment for the temp and thus eliminate the profit we made from the temp! Ultimately, unless the temp didn't file, the money we made on the temp was completely subtracted by required unemployment payments. It was exactly like, to use a football analogy, making a 10-yard gain and consistently having it eliminated by a holding penalty. … I can only imagine what other agencies are going through now with this administration."

__John S., president of Vinyl Headlights Inc., shared his plight:

"We are a variety rock band that travels up and down the East Coast. Yes, everyone thinks we're lefty rockers, but that could not be further from the truth. We're all businessmen, and we provide a service. Since Obama's term, I have been watching our cost of business going up (UI, fuel, licenses, etc.), and we've had to modify our rates lower to keep us profitable. … We have let an employee go to further reduce costs. The last resort is to dissolve the company and send every man for himself. More than likely, all employees would take unemployment. If the government just got out of the way, I could employ people and provide the government revenue, but I am better off employing no one to keep from paying UI and the taxes. If a musician can get it, why can't (Obama)? Oh, wait: He's never had to make a payroll, and private enterprise is the enemy."

These unsung Obama jobs death toll stories are amassing across the nation. Alas, the victims of government wealth redistribution never earn as much of Washington's attention as the beneficiaries.****

That's actually not so surprising, considering that the $3 billion in fees represents only 4 bps (0.04%) of the total amount ($7.8 trillion!!!) raised. It's the total that is mind-boggling. Where did that money come from and where did it go??

The cities of Minneapolis and St. Paul towed more than 1000 cars on Christmas; it is hard to keep track not to park on the even side of the street the second day after a snow emergency when snow emergencies are declared roughly every 3 days.

Good news is that a) we have a whole new diverse group of citizens thinking of joining the anti-government wing of the tea party, and b) we finally have achieved our goal with complete separation of church and state.

For those who did remember and moved their cars on time Christmas day for the 6th time this month, we have bad news. They can't push the snow far enough to park there again and still let cars drive through.

http://www.kare11.com/news/news_article.aspx?storyid=895983More than 1,000 vehicles towed in this latest snow emergency in the cities of St. Paul and Minneapolis."Yeah it's not a merry Christmas at all," Jennifer said in the line at the St. Paul tow lot Sunday night.That tow lot was packed Sunday night with people in the bitter cold standing in a single file line to pay upwards of two hundred dollars to get a vehicle back that was parked illegally in the city's snow emergency, declared Saturday.

Here's something most Republicans don't want to hear: There is no way the born-again, straight and sober Republicans of the 112th Congress are going to get spending under control unless they involve the fellow at 1600 Pennsylvania Avenue.

The spending reforms that Speaker John Boehner and his counterinsurgency lieutenants have proposed—spending reductions to offset any mandatory increases or stated budget limits for the current fiscal year—are terrific. But if you think Congress, by itself, is going to sustain this discipline over time, I have a bridge in Alaska I'd like to sell you.

Congress is a legislative body. Like legislative bodies from ancient Rome till now, its DNA is not to forgo things but to do stuff. Everyone agrees that Congress holds something called the "power of the purse." And don't they know it. Nowhere in the Constitution will you find that phrase. Nor in the Constitution that they are reading on the House floor Thursday will you hear the words "spend," "programs" or "outlays." All this, though, is what Congress has been about since anyone can remember.

The reform groups and blogosphere are threatening hellfire for any Republicans who cross them on spending, but take my word for it: Once any Congress makes it to the budgeting "out years," all that hellfire will be just a puff of smoke. James Buchanan, the father of public choice theory, won a Nobel Prize for unraveling this reality.

It is not hopeless. The locus of hope, however, lies with the Executive, a word at least nominally associated with responsibility. In an article on these pages recently ("Time for Emergency Economic Reform"), a successful political executive, Gov. Mitch Daniels of Indiana, identified the sine-qua-non reform to sustain spending discipline: presidential impoundment power.

However you define the idea—impoundment, rescission, the line-item veto—it is the power of a president or governor to zero out some of the spending pile that a legislature dumps on the front lawn. It is executive pushback against wretched legislative excess.

"Presidents once had the authority," Mr. Daniels wrote, "to spend less than Congress made available through appropriation. On reflection, nothing else makes sense."

Ask New Jersey Gov. Chris Christie about the impoundment power. He has it, and he'll tell you it is indispensable to what he is trying to do in his hopelessly profligate state. Absent that impoundment power, a lot of the Christie pitch would be just rhetoric.

Before getting into why 43 governors, but not the U.S. president, have this power, a comment on those who say that impoundment is a pop-gun, that it can't control entitlements or mega-programs.

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Corbis

The Roman Senate contemplates bankrupting the empire..Perhaps you have heard of the "broken windows" theory of urban chaos. It says that in a neighborhood wracked with murder and mayhem, it is important to repair broken windows. The idea is that leaving small matters like broken windows unrepaired tells criminals that no one cares if they break the neighborhood further, and it tells the people there is no hope of fixing the big things. In New York City, this worked.

Earmarks, pork, corporate carve-outs and all that are Congress's broken windows.

Every knowing article written on this subject points out what a "small" percentage of spending this stuff is. But the behavioral incentives for big-time criminals in the Bronx and big-time spenders in a legislature like Congress are the same. An annual federal budget of $3.5 trillion is a towering monument of broken windows. Federal highway spending has been on automatic pilot for nearly 20 years. Sen. Tom Coburn has a long list of programs uselessly duplicated across the government; nine agencies run 69 early-education programs.

Here is a list of U.S. presidents and public figures who have used or supported the impoundment power: Abe Lincoln, Franklin Roosevelt, Harry Truman, JFK, LBJ, Bill Clinton, the Bushes, John McCain, John Kerry, Al Gore, Pat Buchanan, Jeb Hensarling, Russ Feingold, Joe Lieberman, Judd Gregg, and not least both Paul Ryan, the new House Budget chairman, and Barack Obama.

This crucial executive ballast does not exist mainly for two reasons.

In the early 1970s, Richard Nixon tried aggressively to impound spending, touching off a war with Congress's "prerogatives." Then Watergate broke. In a fury, one of the most liberal Congresses passed the Budget Control Act of 1974 (which should be repealed). It transferred most spending "control" to Congress, which one commentator at the time called "congressional government—and chaos."

Second, the Constitution is ambiguous on how to divide this authority, and the Supreme Court, in coin-flip decisions, has sided with Congress.

All the congressional names above, especially Rep. Ryan, have tried to thread this legal needle. But it doesn't exist because the bipartisan pig-out caucus—in hiding now—won't let it happen.

Yes, this week the GOP Congress is talking about a lollapalooza annual budget cut of $100 billion. Go for it! But let's hear Barack Obama put the impoundment power back in play in his State of the Union address—for this presidency and however many presidents are left in the future of our broken-windows capital.

These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.

Wait — Texas? Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years.

And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere.

How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New York’s, about as bad as California’s, but not quite up to New Jersey levels.

The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who haven’t been keeping up with the news). It was the state the recession supposedly passed by, thanks to its low taxes and business-friendly policies. Its governor boasted that its budget was in good shape thanks to his “tough conservative decisions.”

Oh, and at a time when there’s a full-court press on to demonize public-sector unions as the source of all our woes, Texas is nearly demon-free: less than 20 percent of public-sector workers there are covered by union contracts, compared with almost 75 percent in New York.

So what happened to the “Texas miracle” many people were talking about even a few months ago?

Part of the answer is that reports of a recession-proof state were greatly exaggerated. It’s true that Texas job losses haven’t been as severe as those in the nation as a whole since the recession began in 2007. But Texas has a rapidly growing population — largely, suggests Harvard’s Edward Glaeser, because its liberal land-use and zoning policies have kept housing cheap. There’s nothing wrong with that; but given that rising population, Texas needs to create jobs more rapidly than the rest of the country just to keep up with a growing work force.

And when you look at unemployment, Texas doesn’t seem particularly special: its unemployment rate is below the national average, thanks in part to high oil prices, but it’s about the same as the unemployment rate in New York or Massachusetts.

What about the budget? The truth is that the Texas state government has relied for years on smoke and mirrors to create the illusion of sound finances in the face of a serious “structural” budget deficit — that is, a deficit that persists even when the economy is doing well. When the recession struck, hitting revenue in Texas just as it did everywhere else, that illusion was bound to collapse.

The only thing that let Gov. Rick Perry get away, temporarily, with claims of a surplus was the fact that Texas enacts budgets only once every two years, and the last budget was put in place before the depth of the economic downturn was clear. Now the next budget must be passed — and Texas may have a $25 billion hole to fill. Now what?

Given the complete dominance of conservative ideology in Texas politics, tax increases are out of the question. So it has to be spending cuts.

Yet Mr. Perry wasn’t lying about those “tough conservative decisions”: Texas has indeed taken a hard, you might say brutal, line toward its most vulnerable citizens. Among the states, Texas ranks near the bottom in education spending per pupil, while leading the nation in the percentage of residents without health insurance. It’s hard to imagine what will happen if the state tries to eliminate its huge deficit purely through further cuts.

I don’t know how the mess in Texas will end up being resolved. But the signs don’t look good, either for the state or for the nation.

Right now, triumphant conservatives in Washington are declaring that they can cut taxes and still balance the budget by slashing spending. Yet they haven’t been able to do that even in Texas, which is willing both to impose great pain (by its stinginess on health care) and to shortchange the future (by neglecting education). How are they supposed to pull it off nationally, especially when the incoming Republicans have declared Medicare, Social Security and defense off limits?

People used to say that the future happens first in California, but these days what happens in Texas is probably a better omen. And what we’re seeing right now is a future that doesn’t work.

I have heard about the deficit in Texas but was not sure what it entailed. So I have done a quick search to educate myself and I stress quick. It was my understanding that Texas has a balance budget amendment, so how can we have a deficit? Well I found the below article. It is from a very left point of view but seems to explain things. Bottom line we cut taxes and have to now cut spending due to the reduced revenue. The left is screaming, they cant conceive of where or that we can cut. They claim our conservative plan to not raise taxes and cut spending doesn't work because we have to cut spending.........but that is the plan to CUT SPENDING! Smaller government!................................Understanding the budget and Texas’ structural deficithttp://eyeonwilliamson.org/?p=7118

Texas has an annual “structural deficit” of about $4.5 billion per year. It was created in 2006 by Gov. Rick Perry and the GOP controlled Texas Legislature. What at the time was billed as a tax-swap of 2006 was nothing of the kind. While it lowered property taxes, the taxes it created to offset that have been way too small to make up the difference – creating the structural deficit. Here’s how it was describes last year during the legislative session, Deficit or awash in cash?Remember when lawmakers cut school property taxes three years ago? Dropping the maintenance and operation tax rate from $1.50 per $100 valuation costs the state more than $7 billion every year for public education.And the new business franchise tax and cigarette tax increase generates about $2.5 million more than the old franchise tax – leaving a gap of nearly $5 billion.“That’s called a structural deficit,” Rep. Scott Hochberg, D-Houston, said. “I don’t think it’s a surprise or any new finding that we have a structural deficit. It was very clear that we passed tax cut bills that had greater costs to them than the replacement tax bills.”Of course the problems were known with Perry and the Texas GOP’s “tax-swap” scheme when it was passed. From the Center for Public Policy Priorities Policy Page titled Digging a Hole: Special Session Tax and School-Finance Package Creates $10.5 Billion Deficit in 2008-09 BudgetThe fiscal notes for the tax and school-finance bills passed during the special session reveal a gap of $10.5 billion between the expected costs of HB 1 and anticipated revenues from HB 3, 4,and 5 in 2008-09. This deficit will place tremendous pressure on the next state budget, which could cause severe budget cutbacks, an increase in the state sales tax or other state taxes, an expansion of gambling as a source of revenue, or all of the above.[...]What is the net result?Combining the estimated costs of HB 1 with the estimated revenue from HB 3, 4, and 5 reveals a potentially disastrous gap in future budgets. As the table below shows, the expected deficit in 2008-09 is $10.48 billion,growing to $11.12 billion in 2010-11. This deficit will place tremendous pressure on the next state budget, which could cause severe budget cutbacks, an increase in the state sales tax or other state taxes, an expansion of gambling as a source of revenue, or all of the above.Of course Perry and the Texas GOP caught a break last year when it received help from the federal government. The problem was able to be overcome in the last budget cycle by using the federal stimulus money. The point is Perry, Dewhurst, and the rest of the GOP knowingly created a deficit in 2006. Why? Well this has been part of the GOP’s plan since Reagan became president. To create large deficits in order to force cuts to social programs and public education, which have long been the biggest enemy of those on the far right. They don’t believe the government should be involved in giving people a hand up, whether it’s health care for children or an education.Jason Embry in the AAS on Wednesday put it this way, Budget mess got going with 2006 property tax cuts.A picture of how the state could look after a budget shortfall hits next year is starting to emerge.Fewer guards would patrol state prisons. Universities would postpone facility upgrades. Doctors would get less money for seeing Medicaid patients.[...]We don’t yet know how deep the cuts will be. What we do know is how we got here, and it’s not for the reason state leaders want you to believe.The economic downturn isn’t helping the shortfall, but it’s not driving it, either. The driving factor is a decision by Gov. Rick Perry and the Legislature in 2006 to reduce property taxes by $14 billion every two years and raise only about $9 billion to replace that money. In other words, the Legislature committed $5 billion every two years to holding down property taxes instead of spending that money on education, public safety or other priorities.Then the state’s new business tax brought in drastically less than projected, and that $5 billion gap turned into a nearly $9 billion gap. Lawmakers from both parties did little to address that reality when they met in 2009, and in fact they made the gap a little wider by exempting 40,000 small businesses from the new tax.And as he goes on to point out, if taxes are not increased there will be sizable cuts in spending. More like the draconian cuts that were made 2003.Essentially what all of this shows is that much of Texas’ deficit was pre-determined, no matter how the overall economy in Texas and our country overall has been functioning. And while our governor is on TV telling us how many times he “cut” taxes, he won’t say anything about the structural deficit he signed into law in 2006. And Perry’s GOP opponents are quick to chastise him for the 2006 tax swap scheme because it raised taxes on corporations and some business, they don’t mention the fact that it created structural deficit. Probably because if they did they would have to say what the would do to fix it, and they don’t want to debate that.As another CPPP report points out, “..Texas is a low-tax state, with a structural deficit.” If we want to educate our children it’s going to cost money. And it’s untrue, no matter how many times that guy with the good hair on TV says it, that Texas can provide the essential services to it’s people, do what’s morally right, allow them to live with dignity and have tax cuts too.

I shared the Krugman piece with Top Dog who now lives in Houston. Here are his comments on it:

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Talk about slanted! True, housing is much cheaper if you simply look at the inital purchase - as we did. Where they make up for it is in the highest property taxes in the Gulf - my taxes here are 3 times more than I paid in Long Beach! We got a boost in population due to the influx of people from Louisiana ( New Orleans/Katrina that doesn't seem to get reported enough) and to some extent the petrochemical industry but oil was ridiculously high for about 4 months before it crashed to the 70's and the jobs remained.

The economy "feels" better here compared, say , to CA but no one thinks it is a gravy train. So, is Krugman's point that neither system works or that Texas is full of it and should be villified? He always struck me as - suprize! - trying to attract attention to himself with edgy statements.

Btw it is still okay to have a gun show - and buy a gun on the spot - every weekend anywhere. The states he mentioned do not allow this. Politicians here know this and respect the fact they have an armed population and not shrill or dependant citizens. - I have 3 and lots of ammo. Ryan is a pretty good shot with his .22 that St. Nick brought him this Christmas (that's right, CHRISTMAS, not "Holidays"!). Santa preffers a W&S .357 revolver long barrel loaded with hollow points. A little old school but hey! it's very effective.

If Texas added a 1% income tax, the top rate in Calif. would still be roughly 1000% higher.

Regarding Krugman, what a bunch of BS to compare budget struggles and leave that small fact out!

I happen to believe income tax is the best tax (if low, flat, simple and fair) because that is where the money is. Unfortunately once you open that door, endless escalation and abuse of it is your future.

Property taxes don't come with a source of money to pay them so eventually they take your property unless you have an enduring source of - income. Still it sounds like property taxes aren't much worse in Texas than California where by contrast they collect $54 Billion off the personal income tax alone (2008). http://www.lao.ca.gov/2009/tax/revenues_0209/revenues_020609.aspx Calif had Prop 13, the beginning of tax revolt, but I don't know where that stands now.

Besides leaving no state income tax out of a state budget comparison, Nobel Laureate Prof. Krugman suddenly drops California (at 12%) out of his comparison when he refers to Texas' below average unemployment rate as being no big deal.

Property tax is a direct assault on liberty. Liberty is at stake when you have to pay rent(property tax) to the government. Income tax would be unconstitutional without the amendment. It treats people unequally and promotes class warfare. I have not seen a better system than the fair tax. That is my 2 cents

Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud. The cost was a closely guarded secret until last week, when the companies and their regulator produced an accounting at the request of Congress.

The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating. Documents reviewed by The New York Times indicate that taxpayers have paid $24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.

Late last year, Randy Neugebauer, Republican of Texas and now chairman of the oversight subcommittee of the House Financial Services Committee, requested the figures from the Federal Housing Finance Agency. It is the regulator charged with overseeing the mortgage finance companies and acts as their conservator, trying to preserve the company’s assets on behalf of taxpayers.

“One of the things I feel very strongly about is we need to be doing everything we can to minimize any further exposure to the taxpayers associated with these companies,” Mr. Neugebauer said in an interview last week.

It is typical for corporations to cover such fees unless an executive is found to be at fault. In this case, if the former executives are found liable, the government can try to recoup the costs, but that could prove challenging.

Since Fannie Mae and Freddie Mac were taken over by the government in September 2008, their losses stemming from bad loans have mounted, totaling about $150 billion in a recent reckoning. Because the financial regulatory overhaul passed last summer did not address how to resolve Fannie and Freddie, Congress is expected to take up that complex matter this year.

In the coming weeks, the Treasury Department is expected to publish a report outlining the administration’s recommendations regarding the future of the companies.

Well before the credit crisis compelled the government to rescue Fannie and Freddie, accounting irregularities had engulfed both companies. Shareholders of Fannie and Freddie sued to recover stock losses incurred after the improprieties came to light.

Freddie’s problems arose in 2003 when it disclosed that it had understated its income from 2000 to 2002; the company revised its results by an additional $5 billion. In 2004, Fannie was found to have overstated its results for the preceding six years; conceding that its accounting was improper, it reduced its past earnings by $6.3 billion.

Mr. Raines retired in December 2004 and Mr. Howard resigned at the same time. Ms. Spencer left her position as controller in early 2005. The following year, the Office of Federal Housing Enterprise Oversight, then the company’s regulator, published an in-depth report on the company’s accounting practices, accusing Fannie’s top executives of taking actions to manipulate profits and generate $115 million in improper bonuses.

The office sued Mr. Raines, Mr. Howard and Ms. Spencer in 2006, seeking $100 million in fines and $115 million in restitution. In 2008, the three former executives settled with the regulator, returning $31.4 million in compensation. Without admitting or denying the regulator’s allegations, Mr. Raines paid $24.7 million and Mr. Howard paid $6.4 million; Ms. Spencer returned $275,000.

Fannie Mae also settled a fraud suit brought by the Securities and Exchange Commission without admitting or denying the allegations; the company paid $400 million in penalties.

Lawyers for the three former Fannie executives did not respond to requests for comment. A company spokeswoman did not return a phone call or e-mail seeking comment.

In addition to the $160 million in taxpayer money, Fannie and Freddie themselves spent millions of dollars to defend former executives and directors before the government takeover. Freddie Mac had spent a total of $27.8 million. The expenses are significantly larger at Fannie Mae.

Legal costs incurred by Mr. Raines, Mr. Howard and Ms. Spencer in the roughly four and a half years prior to the government takeover totaled almost $63 million. The total incurred before the bailout by other high-level executives and board members was around $12 million, while an additional $18 million covered fees for lawyers for Fannie Mae officials below the level of executive vice president. Many of these individuals are provided lawyers because they are witnesses in the matters.

Employment contracts and company by-laws usually protect, or indemnify, executives and directors against liabilities, including legal fees associated with defending against such suits.

After the government moved to back Fannie and Freddie, the Federal Housing Finance Agency agreed to continue paying to defend the executives, with the taxpayers covering the costs.

================

But indemnification does not apply across the board. As is the case with many companies, Fannie Mae’s by-laws detail actions that bar indemnification for officers and directors. They include a person’s breach of the duty of loyalty to the company or its stockholders, actions taken that are not in good faith or intentional misconduct.

Richard S. Carnell, an associate professor at Fordham University Law School who was an assistant secretary of the Treasury for financial institutions during the 1990s, questions why Mr. Raines, Mr. Howard and others, given their conduct detailed in the Housing Enterprise Oversight report, are being held harmless by the government and receiving payment of legal bills as a result. “Their duty of loyalty required them to put shareholders’ interests ahead of their own personal interests,” Mr. Carnell said. “Had they cared about the shareholders, they would not have staked Fannie’s reputation on dubious accounting. They defied their duty of loyalty and served themselves. At a moral level, they don’t deserve indemnification, much less payment of such princely sums.”

Asked why it has not cut off funding for these mounting legal bills, Edward J. DeMarco, the acting director of the Federal Housing Finance Agency, said: “I understand the frustration regarding the advancement of certain legal fees associated with ongoing litigation involving Fannie Mae and certain former employees. It is my responsibility to follow applicable federal and state law. Consequently, on the advice of counsel, I have concluded that the advancement of such fees is in the best interest of the conservatorship.”

If the former executives are found liable, they would be obligated to repay the government. But lawyers familiar with such disputes said it would be difficult to get individuals to repay sums as large as these. Lawyers for Mr. Raines, for example, have received almost $38 million so far, while Ms. Spencer’s bills exceed $31 million.

These individuals could bring further litigation to avoid repaying this money, legal specialists said.

Although the figures are not broken down by case, the largest costs are being generated by a lawsuit centering on accounting improprieties that erupted at Fannie Mae in 2004. This suit, a shareholder class action brought by the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio, is being heard in federal court in Washington. Although it has been going on for six years, the judge has not yet set a trial date. Depositions are still being taken in the case, suggesting that it has much further to go with many more fees to be paid.

IMHO this is one of the most important issues there is when it comes to rolling back spending and establishing honest, sound policies; I've mentioned it here before, to little effect-- but until we get this, we our without solution to our dilemas:=======================

Move over, Chris Christie. New York Democratic Governor Andrew Cuomo is bidding to join the New Jersey Republican as the national spokesman for fiscal sanity, and he's doing so in a politically clever way that House Republicans could learn from.

The budget that Mr. Cuomo unveiled this week closes a gaping deficit with major budget reductions, calling for spending cuts in state hiring, education, health care, aid to universities and payments to cities. The plan would balance the Empire State's $135 billion budget without a dime of new taxes or borrowing. Remarkably, if his budget passed, the state would spend $3.5 billion less than it did last year.

And remember, we're talking about politically liberal New York, not New Hampshire. If you're surprised by this, you should see long-time Democratic Assembly Speaker Sheldon Silver, who looks as though he stuck his finger in the electric socket.

These cuts are impressive on their own, but Mr. Cuomo's real conceptual breakthrough is to expose the rigged-game of "baseline budgeting." This is a gambit by which spending increases automatically each year even before a Governor submits his budget. The "baseline" grows each year due to spending formulas that legislatures build into the law even before they take a single vote.

Mr. Cuomo put it this way in a New York Post op-ed on Tuesday: "When a governor takes office, in many ways the die has already been cast. Unbelievably, this year these rates and formulas in total call for a 13 percent increase in Medicaid and a 13 percent increase in education funding next year."

This means that if Mr. Cuomo proposes a spending increase for Medicaid that is less than 13%, he will be attacked for "cutting" spending. Yet overall Medicaid spending would still increase. As Mr. Cuomo notes, "this process frames the dialogue around the budget and biases the political discourse." That is precisely the goal of government unions and the politicians who follow their orders because it allows them to increase spending even as they cry fiscal havoc.

Mr. Cuomo points out that under the automatic baseline formulas, the New York state budget deficit this year is estimated to be $10 billion. Yet if the state operated like families do, with a new budget for each year starting from a base of what the state spent the year before, the deficit would be closer to $2 billion. Closing a deficit of that size suddenly becomes a lot easier, making it much harder to justify the tax increases that Mr. Silver and his cronies are famous for.

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New York Gov. Andrew Cuomo.The Governor is proposing a reform that would deflate these baselines with more reasonable and affordable spending projections. For example, his budget would base a spending increase for Medicaid on the rate of medical inflation, which is less than half the 13% increase previously assumed in the budget. He would hold education funding to the rate of personal income growth, about half the growth built into the baseline for school budgets. By fixing this fraudulent convention, Mr. Cuomo's budget reduces spending for years to come without having to fight political battles every year.

There's a vital lesson here for House Republicans because the same baseline games have long prevailed in Washington. The Democrats who wrote the budget rules also built in formulas that increase spending each year before Congress even takes a vote. Those same Democrats are now lying in wait for Republicans to propose their budget, and they will describe even increases in spending as brutal "cuts." The media will dutifully play along.

Republicans ought to follow Mr. Cuomo's savvy lead and blow the whistle on this rigged process early and often. Alas, we fear too many Republicans want to brag about their "cuts" to impress the tea party even if they come from an inflated baseline. This is a recipe for letting Democrats frame the budget debate in ways that will make it harder for Republicans to achieve their budget goals, even as the GOP suffers political damage in the process. They would be smarter to take Mr. Cuomo's cue.

This is not to say Mr. Cuomo's budget is perfect. The Governor reduces education aid by 7.3% and tells schools to get their costs under control, thin bloated payrolls, and do more with less. He would also allow New York City and other cities to lay off thousands of "nonteaching teachers." But he doesn't propose to let cities lay off teachers based on merit, as opposed to seniority—which means that many of the youngest and best teachers will lose their jobs. Mr. Cuomo seems to think this would be too difficult to pass given his other priorities, but such a reform will never pass if it isn't part of his first budget when his political capital is at its peak.

Mr. Cuomo nonetheless deserves credit for breaking Democratic type and following through on his campaign promise to shape up Albany. His fight has only begun, but he's off to a shrewd and useful start.

"Baseline Budgeting - IMHO this is one of the most important issues there is when it comes to rolling back spending and establishing honest, sound policies..."

I agree wholeheartedly but it is easier said than done. I believe this is something Newt promised and could not / did not deliver. We actually should approach him now on answering this.

In my sales past I had the opportunity to sell office systems to government agencies State and Federal. There literally were rushes in certain cases to spend up money at the end of fiscal years to avoid having next year's agency or office budget start lower, in other words a reverse incentive from cost savings, efficiency and results. Now budgets mostly have been squeezed and extra money isn't so freely floating around, but the nature of the beast has not changed.

From my armchair I say we need zero-based budgeting. You justify your mission, your results, your collateral damage and your budget needs each year starting up from zero. In the real world, these people can't even be fired or have their pay cut, leases on office spaces have financial commitments, so do computer systems etc. Still the baseline could be set at zero increase, with some offices, agencies or overlapping functions facing percentage cuts or extinction. The problem there is political. You have to be able to face the advocates of big government who say the usual, food to the hungry, meds to the elderly etc.

Zero increase is how far Obama went (with his latest head fake). But he means lock in the trillions of temporary, emergency increases, call it a freeze, then not stick to it for the same reason, fat children could die of starvation or whatever the latest poll tested line is.

Overlapping functions of govt is huge IMO. Getting the Feds out of many of its current functions and sending it with the money back to the states can get rid of some overlap.

Mostly it is definition of government. If we asked it do less, key functions that remain would be more manageable. Of course we are still headed full steam in the opposite direction, see health care flow chart, cash for clunkers, electric car programs, high speed rail, light bulb selection agency, CO2 is a poison program, insulation credits and monitoring, 1099s for lawn mowing, federal auto manufacturing agency, ownership of the private mortgage market, ATM fee control agency, federal utility bill assistance as a compensator for raising your rates with excessive regulations elsewhere, etc, I could go on.

Back to the first point about immovable costs: some end or control of the public employee union phenomenon will necessarily precede any real budget or efficiency improvements or innovations - and no one has proposed that.

http://www.JewishWorldReview.com | Tall, affable Buck McKeon sits, gavel in hand, at the turbulent intersection of two conflicting Republican tendencies. The chairman of the House Armed Services Committee embodies the party's support for a "strong" defense, which is sometimes measured simply by the size of the Pentagon's budget. But the 35 Republicans on his 62-member committee include 13 first-term legislators, some of whom embody the Tea Party's zeal for cutting government spending.

The United States spends almost as much on military capabilities as the rest of the world spends, and at least six times more than the second-biggest spending nation (China). But McKeon says, "A defense budget in decline portends an America in decline." And: "I've been around a long time, and I've seen us cut defense investments over the years after wars. . . . But I've never before seen us make cuts during a war. Cuts to defense investment in the midst of two wars is unacceptable." Asked, however, about the immediate future of the defense budget, he says, after a long pause: "It's probably going to be smaller."

One war, in Iraq, will, the president promises, end this year with the withdrawal of U.S. forces. The other, in Afghanistan, probably will not become more expensive because the number of troops there probably will not be increased. Furthermore, since fiscal 2001, what is called the military's "baseline budget" has increased 80 percent, to $534 billion. That number is, however, much less than what is actually being spent, and not just because it doesn't include much of the spending on the two wars.

The Obama administration wants to cut $78 billion over five years, in addition to cuts already planned. McKeon and others are resisting, starting with Defense Secretary Robert Gates' decision to halt work on a $14.4 billion Marine program for a new Expeditionary Fighting Vehicle, a 39-ton landing craft and tank that can deliver 17 Marines in an amphibious assault.

Although the Marines' last opposed landing was in 1950 in Korea at Inchon, some legislators think ending the EFV program strikes at the Marines' core mission. McKeon wonders: What if the next "denied space" the Marines must enter is along the Strait of Hormuz? The Inchon landing craft, which traveled only 6 mph, had to leave from ships close to shore - too close for today's shores perhaps bristling with anti-ship missiles. The EFV travels 20 knots from 25 miles offshore - and sprints 45 mph on shore.

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The average age of America's amphibious assault vehicles is 38 years, more than that of strategic bombers (34 years) but less than that of tanker aircraft (46 years). Gates favors finding a more affordable ship-to-shore vehicle. Lt. Gen. George Flynn, the Marines' deputy commandant for combat development and integration, says the EFV program "was unaffordable." Was. Past tense.

Such statements are in the subjunctive mood until Congress speaks. But some congressional voices are impatiently insisting that no one can say how much is being spent on defense, or how.

After listening to recent Defense Department testimony, Randy Forbes, a six-term Virginia Republican on McKeon's committee, was exasperated. He said that for four years the department, whose $708 billion budget - his number - is the size of the world's 22nd-largest economy (the Netherlands), has not complied with the law requiring auditable financial statements. And he charged that "none" of the budget is "even in a position to be audited." He said that the department is not "qualified" to talk about efficiencies if it "does not know where our defense dollars are going" and that it cannot comply with the law if it "does not even have mechanisms in place to perform the audits."

Sen. Tom Coburn (R-Okla.), writing to Adm. Gary Roughead, chief of naval operations, said that "the Pentagon is one of the few agencies in the federal government that cannot produce auditable financial statements in accordance with the law." So "I will continue to push for a budget freeze of all base budget non-military personnel accounts at the Defense Department until it complies with the law regarding auditable financial statements."

To govern is to choose, always on the basis of imperfect information. If, however, the strong language of Forbes and Coburn is apposite, Congress cannot make adequately informed choices about the uniquely important matters that come to McKeon's committee. This fact will fuel the fires of controversy that will rage within the ranks of Republicans as they come to terms with the fact that current defense spending cannot be defended until it is understood.

If the US federal government were a bank, the FDIC would close them down this Friday night. Earlier today, President Obama submitted next year’s budget. The new budget, despite “cutting” the deficit by $1.1 trillion, will require Congress to pass a large increase in the “debt ceiling.”

In February 2010, the US raised the debt ceiling to $14.3 trillion (up $1.9 trillion) and then promptly borrowed every dime it could. Even with the “cuts” proposed by the President (or those being talked about by Congress), the government will spend roughly $7 trillion more than it receives in income over the next 10 years. Bottom line: The US federal budget is a mess. It’s on an unsustainable course. And that’s a view that takes all the “spin” at face value.

And believe us, there is a ton of spinning taking place. The president’s budget director Jacob Lew says the new budget will “save” $1.1 trillion over the next ten years. But about 1/3 of the “savings” will come from higher taxes. Under this budget, spending will be 49% higher in 2021 than it is in 2011.

In other words, even after tightening its fiscal belt and confiscating more private resources, the federal government will remain huge and out of control. The President’s budget for 2012-2021 forecasts that federal spending will never fall below 22.3% of GDP. Never before in history has the level of non-defense spending been so high for so long.

In effect, the budget proposed by President Obama locks in, like many European states, a deficit of at least 3% of GDP for as far as the eye can see. As a result, growing spending more slowly than GDP or freezing spending is no longer enough. The only way to get government under control is to cut spending outright.

The last time spending grew more slowly than GDP was under President Clinton, when spending fell from over 22% of GDP in 1992 to 18.2% in 2000. The end of the Cold War gave the US a peace dividend, which allowed for defense cuts.

But since President Bush took power in 2000, federal spending has increased by 93% and if we can believe the budgets being proposed in recent days, this spending binge will be locked in place and not reversed.

That’s why we’re cheered by the open rebellion of many newly elected members of the House to both their leadership’s plan and Obama’s plan to slow spending. They know that, after the government binge of the past decade, simply slowing the growth of spending or even “freezing” it is not good enough. They are not looking for excuses to cut spending slowly.

Claiming budget savings by freezing spending at today’s levels is like an alcoholic who says he’s sober because he’ll never drink more than yesterday’s bender. Trouble is, this alcoholic doesn’t even pay his own tab.

Always a worthwhile read. Yes he is both an avid opponent of the Obama agenda and a predictor of modest growth. I think just being honest in both cases. I think he would tell you growth rates coming out of this type of hole should be 4, 5, 6% of more if we implemented bold, pro-growth policies.

"The last time spending grew more slowly than GDP was under President Clinton, when spending fell from over 22% of GDP in 1992 to 18.2% in 2000."

He goes on to give one valid contributor: "The end of the Cold War gave the US a peace dividend, which allowed for defense cuts." (Put another way, gut intelligence and suffer unprecedented attacks)

Another partial explanation to keep in mind is that the end year 2000 was a bubble economy that was pierced during that year. If you take a longer look and smoothed out the erratic data of the bubble and trough that followed, the change in that ratio would not be so dramatic. A chart at this 2002 CBO link http://www.cbo.gov/doc.cfm?index=3521&type=0 shows how that percentage worsens in 2001 just continuing the path of the same policies. (Note also how wrong they are within a decade even though they had the confidence to forecast out 75 years.)-----We need IMO a budget amendment to cap federal spending at 20% of previous year GDP with a 2/3 supermajority required for every penny above that. Tell Democrats and independents we just want to lock in the success of what worked for President Clinton.

Here's this: I very much consider myself a Tea Party man, but disagree with the not insignificant faction within the movement that tends towards isolationism and Fortress America. Yes we are evolving from the unipolar moment of America in the world but that needs to be thought out on its own terms-- not undercut our troops actively defending us in hard fighting and unprepare for the Chinese challenge simply in order to have cuts that enable BO to continue to piss away our country's future.================

February 14, 2011Gates Sees Crisis in Current SpendingBy THOM SHANKER and CHRISTOPHER DREWWASHINGTON — Even as the Obama administration on Monday rolled out its budget for 2012, Defense Secretary Robert M. Gates was dueling with Congress over military spending for this year, saying the Pentagon cannot do its job with cuts of more than $9 billion.

Mr. Gates said restrictions on spending “may soon turn into a crisis” for the military, as Congress, deadlocked over the politics of passing a federal budget for 2011, placed the government on a “continuing resolution” that has limited Pentagon spending since last autumn.

If that stopgap budget stays in place for the entire fiscal year, it would result in military spending of $526 billion, not counting the costs of the wars in Afghanistan and Iraq, or a cut of $23 billion from the administration’s request of $549 billion. Mr. Gates demanded that Congress approve 2011 spending of at least $540 billion.

“Suggestions to cut defense by this or that large number have largely become exercises in simple math, divorced from serious considerations of capabilities, risk, and the level of resources needed to protect this country’s security and vital interests around the world,” Mr. Gates said in a Pentagon news conference.

Congressional leaders now say they plan to attach a full military appropriations bill to the continuing resolution that would finance the rest of the government. While that bill would impose cuts of $16 billion, this at least could allow the Pentagon to award new contracts and shift some money around among programs.

But Congress could make some of these allocations, and Mr. Gates said that despite the Pentagon’s reservations, he would continue money for an alternate engine for the F-35 Joint Strike Fighter until Congress acted. The bill being drafted, for example, could include $450 million to keep the engine project alive. Pentagon officials have estimated that it could cost $2 billion to $3 billion to finish developing the engine, which Mr. Gates and President Obama say the military cannot afford.

The dispute has drawn attention recently because the engine work provides jobs in Ohio, the home state of the new House speaker, John A. Boehner. But Democrats in both houses have also repeatedly voted to save the second engine, partly to provide competition for contracts that could ultimately be worth up to $100 billion.

For next year, the Pentagon is requesting $670.6 billion for the 2012 fiscal year, which starts Oct. 1. That includes $553 billion for its base budget and $117.8 billion for military operations in Iraq and Afghanistan.

As a result, the total of $693 billion in 2010 might have represented the peak for the surge in military spending that began after the Sept. 11 terrorist attacks. And Congressional leaders say that new members from the Tea Party movement may try to cut military spending even more.

The biggest cuts for next year would come in the war budget with most of the troops returning from Iraq. The overseas spending would drop by $41.4 billion from the $159.3 billion that the administration proposed for 2011, and it would fall to the lowest level since 2006.

All six members of the Joint Chiefs of Staff also weighed in to the coming budget debate on Monday, signing a letter expressing support for what they described as “modest and manageable” increases in fees for working-age military retirees who have chosen to remain on the Defense Department’s Tricare medical insurance program.

Total health care costs for the Pentagon, which is the nation’s single largest employer, top $50 billion a year, one-tenth of its budget. A decade ago, health care cost the Pentagon $19 billion; five years from now, without changes, it is projected to cost $65 billion. Tricare fees have not increased since 1995.

“We will continue to provide the finest health care benefits in the country for our active and retired military service members and their families while continuing to serve as responsible financial stewards of the taxpayers’ investment in our military,” the letter said.

All six members of the Joint Chiefs of Staff, each a four-star officer, have not signed such a correspondence, known as a “24-star letter,” since 2006. Congress has voted down other plans to increase Tricare fees, which veterans groups oppose.

As pressure mounted to reduce the deficits, Democratic lawmakers began planning last summer to trim the Pentagon’s request for 2011. The Republicans have added to the proposed cuts since they took control of the House last month.

Under the latest proposal, which could be voted on this week, House Republicans would cut about $15 billion from the Pentagon’s main operating accounts. That would include $11 billion in cuts that the Democratic lawmakers had settled on before the midterm elections.

The reductions would also include $2 billion to $3 billion in lawmakers’ pet projects known as earmarks and more than $1 billion in unspent money from various programs. Other cuts would come in military construction and energy projects.

By JANET HOOK WASHINGTON — The Republican-controlled House on Tuesday took up legislation to make unprecedented cuts in federal spending this year, opening a freewheeling debate that will showcase the two parties' views on the size of government in an era of budget deficits.

In early action on the bill, which would cut domestic programs by $61 billion this year, Republicans showed little appetite for making cuts in the Pentagon. The House rejected four amendments to cut defense programs, including one small cut to get rid of some Pentagon advisory commissions.

"If we cannot do this on defense...where can we do it?" asked Rep. Jeff Flake, the Arizona Republican who sponsored the amendment to cut $19 million for commissions.

That was just the beginning of a spending debate that is expected to extend through the week. Lawmakers filed hundreds of amendments seeking even deeper cuts after GOP leaders made an unusual decision to lift restrictions on proposing changes to the legislation.Most of the amendments would cut domestic programs, but another big defense-spending fight loomed Wednesday, when the House was expected to vote on an amendment to strip from the bill $450 million in funding for an alternate engine for the Joint Strike Fighter.

The Republican bill would cut spending in domestic non-entitlement programs such as high-speed high-speed rail construction, water projects and job training far more deeply and quickly than President Barack Obama and most Democrats favor. The White House issued a veto threat immediately after the bill came to the House floor.

The debate marks the most serious legislative effort yet by the new Republican majority to make good on its campaign promise to slash government spending. It also tests the commitment of House Speaker John Boehner of Ohio to allow a more open legislative process than have other House leaders, who in recent years routinely imposed strict limits on amendments to major bills.Among the amendments were proposals to block the new health care law, clean air regulations, prisoner transfers from Guantanamo Bay, regulation of the Internet, and on topics that appeared far afield, such as one on the corralling of wild horses and burros.

Mr. Boehner acknowledged that an unpredictable legislative bazaar lay ahead. "We are in some uncharted waters," he said. "I'm ready to expect—whatever."

Mr. Boehner received a quick lesson in the challenges of holding a wide-open floor debate. Faced with the long list of amendments awaiting debate, Democrats systematically delayed a vote on even the first one. For hours, Democrats exercised their right to speak for five minutes each.

The amendment on the alternate engine for the Joint Strike Fighter, which was introduced in debate Tuesday night, would hit Mr. Boehner close to home and illustrated the unpredictable nature of leading the conservative freshmen. The alternate engine would be built in part near Mr. Boehner's district at a General Electric Co. plant in the suburbs of Cincinnati.

The Pentagon has opposed the second engine, as have budget watchdogs who call it wasteful. But a similar effort to kill the project was defeated last year by a 231-193 vote.

A government-wide spending bill is needed because federal operations are currently being funded through a short-term measure that expires March. 4. The Democratic-controlled Senate must also act and is expected to push for a compromise that does not cut so deeply.

The bill does not tackle Social Security or Medicare, the fast-growing entitlement programs. Still, the bill's proposal to set 2011 spending at a level $61 billion below 2010 levels marks the biggest cut in discretionary spending Congress has ever made in one piece of legislation, according to House Appropriations Committee staff.

Democrats have said that, faced with a deficit that the White House estimates will grow to $1.6 trillion this year, Congress needs to curb spending. But they say cuts as quick and deep as the Republicans propose would hurt the economy.

"We all understand we have to get spending under control," said Rep. Norm Dicks of Washington. "When you cut this much spending, you are going to hurt the fragile recovery."

Democrats cited a new report by the liberal-leaning Economic Policy Institute that concluded that the spending cuts would result in the loss of 800,000 public and private jobs. They derided a statement by Mr. Boehner seeming to shrug off the prospect of job losses.

"In the last two years, under President Obama, the federal government has added 200,000 new federal jobs," Mr. Boehner told reporters. "If some of those jobs are lost, so be it. We're broke."

Mr. Flake's amendment to cut $19 million for Pentagon commissions met with bipartisan opposition from senior members of the Appropriations subcommittee that oversees defense programs. But Mr. Flake, one of the most conservative members of the House, found allies in a parade of liberals.

Other defense-spending cut amendments, which were defeated Tuesday by wider margins, would have cut money for the V-22 Osprey helicopter; for grants to encourage innovation and research by small businesses, and for the Pentagon to develop alternative energy sources.

Democrats have said that, faced with a deficit that the White House estimates will grow to $1.6 trillion this year, Congress needs to curb spending. But they say cuts as quick and deep as the Republicans propose would hurt the economy.

"We all understand we have to get spending under control," said Rep. Norm Dicks of Washington. "When you cut this much spending, you are going to hurt the fragile recovery."

Democrats cited a new report by the liberal-leaning Economic Policy Institute that concluded that the spending cuts would result in the loss of 800,000 public and private jobs. They derided a statement by Mr. Boehner seeming to shrug off the prospect of job losses.

"In the last two years, under President Obama, the federal government has added 200,000 new federal jobs," Mr. Boehner told reporters. "If some of those jobs are lost, so be it. We're broke."

Republicans argued that Democrats were exaggerating the impact, noting that the $61 billion is a small part of a $3 trillion federal budget. "Democrats don't like it, but don't call it slashing and burning," said Rep. Jack Kingston (R., Ga.).

By KARL ROVE President Obama's 2012 budget is not a serious governing document. It's a political one, designed to boost his re-election chances.

By repeatedly saying that his budget reduces the deficit by $1 trillion over 10 years, he hopes the numbers make him sound fiscally conservative. But he puts off 95% of the deficit reduction until after his term ends in 2013. And he assumes that economic growth in the next few years will be at least 25% higher than credible economic forecasters estimate.

Mr. Obama's budget includes $1.6 trillion in tax increases that are real enough—but most of the spending cuts are not. For example, as Rep. Paul Ryan, the House Budget Committee chairman pointed out to me, the administration projects war costs for Iraq and Afghanistan at surge levels for the next decade, and then conjures up about $1.3 trillion in defense savings by assuming drawdowns in each theater—drawdowns that were already in the cards. Outside of this sham transaction, according to Mr. Ryan, there are only $104 billion in real spending cuts over the next 10 years.

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Mr. Obama's budget includes $1.6 trillion in tax increases that are real enough—but most of the spending cuts are not..Moreover, the administration simply ignores entitlements. This is a dereliction of duty, although it has a certain political logic: The budget is not meant to be taken seriously—it's meant to be quickly forgotten so that the administration can turn attention to, and attack, what congressional Republicans do about federal spending.

Mr. Obama wants House Republicans to take the lead in cutting current spending and proposing future restraint in entitlement and other mandatory spending. He's betting that letting Republicans take the lead will cripple them. This misreads public opinion. But it is plausible to believe that Republican mistakes can help revive Mr. Obama's political fortunes. So it's important that the GOP offers real budget cuts without coming across as angry and frenetic. Republicans need to patiently show what they are doing and why, and to express their sadness and disappointment over Mr. Obama's failure of leadership.

Congressional Republicans need to make methodical and sensible recommendations for cutting discretionary outlays and restraining future entitlement spending. They must explain to the public why the Obama budget will lead to our nation suffering horrific tax increases, massive austerity cuts, and real human suffering. They need to show that the president's fiscal path is, to use a favorite word of his, unsustainable.

Tactically, Republicans should respond to Mr. Obama's agenda as they did to his infatuation with high-speed rail projects. Three days after Vice President Joe Biden touted the magical balm of high-speed trains, House Appropriations Committee Chairman Hal Rogers released the continuing resolution for the balance of fiscal year 2011.

About Karl RoveKarl Rove served as Senior Advisor to President George W. Bush from 2000–2007 and Deputy Chief of Staff from 2004–2007. At the White House he oversaw the Offices of Strategic Initiatives, Political Affairs, Public Liaison, and Intergovernmental Affairs and was Deputy Chief of Staff for Policy, coordinating the White House policy-making process.

Before Karl became known as "The Architect" of President Bush's 2000 and 2004 campaigns, he was president of Karl Rove + Company, an Austin-based public affairs firm that worked for Republican candidates, nonpartisan causes, and nonprofit groups. His clients included over 75 Republican U.S. Senate, Congressional and gubernatorial candidates in 24 states, as well as the Moderate Party of Sweden.

Karl writes a weekly op-ed for the Wall Street Journal, is a Newsweek columnist and is the author of the book "Courage and Consequence" (Threshold Editions).

Email the author atKarl@Rove.comor visit him on the web atRove.com. Or, you can send a Tweet to @karlrove.

Click here to order his book,Courage and Consequence..It cut the rest of this fiscal year's high-speed rail funds, rescinded $3.5 billion appropriated in previous fiscal years but still unspent, and rescinded $3.75 billion in unspent transportation money from the 2009 stimulus, almost all of it from Mr. Obama's high-speed rail plan. Overall, nearly $8 billion was cut from transportation, but none from vital road projects that are real priorities for the states.

The result: Very few Americans believe the billions Mr. Obama wants for speedy trains from Milwaukee to Madison, or Columbus to Cincinnati, will spark economic recovery. This still leaves transportation spending higher than it was two years ago, when Mr. Obama came into office. Republicans can reasonably ask the public: Are we better off with all the spending and red ink Mr. Obama has added over the past two years?

There will be dozens of such confrontations in the months ahead. How Republicans handle these opportunities will go a long way toward determining how popular their agenda is. Politics involves optics as well as policy ideas.

The evidence of the federal government's budget woes is so overwhelming that Americans are ready for tough actions. They understand that failing to make cuts now and to restrain entitlements in the years ahead will doom our children and grandchildren—indeed our country—to a future less prosperous and less free.

Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of "Courage and Consequence" (Threshold Editions, 2010).

This was written before Obama's budget came out. Rove covered that one above just right. Obama projects wars out 10 years that he already committed to retreat from and then calls it a trillion dollar savings. Then he locks in the temporary flood of emergency stimulus spending to eternity and calls it a domestic spending freeze, with trillion and a half dollar deficits. Both claims make sense - if you own our language.

Ryan introduces reasonable cuts and explains the need.

Elsewhere today, Krugman argues that any cut in the waste and egregious excess of our trillion and a half dollar deficit spending will bring down this fragile American economy.

The correct answer of course is that we have proven the ability to collect about $2.5 trillion in federal revenues. We should all agree then to limit spending to 2.5 trillion dollars in today's dollars and today's economy and argue only about how best to spend that money, not over how much.

When House Republicans pledged to make cutting spending our top priority, we knew it wouldn't be easy. The President and his party remain committed to the notion that the best way to create jobs and prosperity is to raise your taxes, spend your money, and then borrow some more money and spend that.

After two years, all of this borrowing and spending has not only failed to deliver promised jobs, but also plunged us deeper into debt. The problem is simple: Many families and businesses look at the size of our debt and the state of our economy and fear that we are heading for a diminished future.

If America can't pay its debts, then people, institutions and other nations will stop lending us money, or they will demand such a high rate of interest that our government will be effectively cut off from future borrowing. At that point, spiraling interest rates would force painful tax increases and steep, sudden cuts to vital national priorities.

We can avoid this outcome, and we must.

Addressing the spending problem now is the key to restoring prosperity. Right now, businesses are holding back on hiring and investment, partly because they are worried that we are headed for a future of large tax hikes and interest-rate spikes. Washington's spending spree has fueled this uncertainty.

Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee this week that one of the best things Congress can do to get businesses hiring and the economy growing again is to demonstrate that we have a serious plan for tackling our fiscal problems.

Since being entrusted with the Majority only a month ago, we have been taking steps to do just that. One of our first official acts was to cut Congress's own budget by five percent. Next, we voted to cut trillions in future government spending by repealing the irresponsible new health care law. And when it comes to funding the government for the rest of this year, we are engaged in a debate that is refreshingly different by Washington standards. We are debating, not whether to cut spending, but how much spending to cut.

In these debates, we started with a simple goal: reduce the budgets for most government agencies back to where they were before the bailouts, before the stimulus package, and before the spending binge. Over the last two years, many federal bureaucracies received budget increases of 30 percent, 40 percent, or - in one case -100 percent. The numbers grow even larger when the failed stimulus is added in.

Our spending cuts are critical first steps to earn back the trust of a skeptical public - a skepticism that is surely justified. More must be done to restore confidence to a private sector that will remain cautious until it is convinced that we are serious about controlling spending. As House Budget Committee chairman, it will be my job to help chart a new course: a path to prosperity.

Our forthcoming budget is our obligation to you - to show you how we intend to do things differently. We're going to cut spending to get the debt down, help create jobs and prosperity, and reform government programs. We owe you an honest debate about our biggest fiscal challenges. If we act soon, and if we act responsibly, we can gradually phase in reforms to our major entitlement programs to save them from bankruptcy and ensure that people in and near retirement will be protected.

It appears President Obama will present a very different vision in the coming days - and in my view, one that takes the nation even further in the wrong direction. And he recently asked Congress to raise the debt limit to accommodate all of the spending and borrowing that he and his party have already committed us to. But the debt crisis that is currently crippling Europe teaches us that we cannot keep making unaffordable promises without eventually hitting a real debt limit - a limit on our borrowing imposed by credit markets in a state of panic.

We must act responsibly and send a clear message: Endless borrowing is not a strategy. Spending restraint must come first. It won't be easy, but America is an exceptional nation, and Americans have risen to greater challenges and prevailed in the past. To restore prosperity today, leaders must rise to the occasion and demonstrate to families and entrepreneurs that they need no longer fear for tomorrow. Until we accomplish that, our work will not be done.

Paul Ryan represents Wisconsin's First Congressional District and serves as chairman of the House Budget Committee.

Government & PoliticsFiscal Insanity: The White House BudgetLast year, Democrats in Congress didn't even bother to pass a budget. Given the increases proposed in the White House budget released Monday, it might behoove Congress to rinse, lather and repeat. Last November, Barack Obama's very own deficit commission recommended that federal spending be cut by $4 trillion over the next decade -- which is still far too little for our liking -- but Obama must have misunderstood. He apparently thought they meant he should spend $4 trillion this year.

The administration's budget proposal sets federal spending for fiscal 2012 at $3.73 trillion, yet another dubious new record for this administration. The deficit for the '12 budget would be $1.65 trillion, or 10.9 percent of GDP, also a record. That would bring the total national debt equal to the worth of the entire U.S. economy, or $15 trillion. Yet Obama has the chutzpah to tout the shamelessly inadequate spending cuts in his budget.

Erskine Bowles, a Clinton administration lackey who co-chaired Obama's deficit commission, was far closer to the mark when he said that the White House's proposal is "nowhere near where they will have to go to resolve our fiscal nightmare." Even Treasury Secretary Timothy Geithner asserted that it would leave the nation with "unsustainable obligations over time."

As for the "cuts" and "savings," The Wall Street Journal notes, "Although the White House trumpets $2.18 trillion in deficit reduction over the next decade, those savings are so far off in the magical 'out years' that you can barely see them from here."

Perhaps most appalling is Obama's utter failure to address entitlement spending -- Social Security, Medicare and Medicaid -- which together constitute the majority of federal spending. Even the liberal Washington Post gets it: "President Obama's budget kicks the hard choices further down the road," said the headline of its recent editorial, which also criticized the president for his budgetary "gimmickry." In other words, the necessary cuts won't happen unless House Republicans begin to undertake the hard work right now.

One of the reasons Obama can claim deficit reduction is the old tax trick -- raise taxes and count on exact revenue increases, completely ignoring the negative effect that doing so will have on the economy. In fact, the White House anticipates economic growth of more than 4 percent in the next three to four years, which is a full percentage point higher than most private economists or the Congressional Budget Office project.

The budget anticipates that taxes on the top two income brackets will rise in 2013, and it includes raising the capital gains tax to 20 percent from 15 percent plus new taxes on energy companies totaling $300 billion. On top of that, the administration is seeking 5,100 additional IRS agents to reduce the estimated $300 billion in unpaid taxes. All told, Obama is counting on $1.5 trillion in new tax revenue -- money taken out of the economy to pay for more government. He keeps calling that government spending "investment," as if that makes it acceptable.

Under this budget, the Department of Health and Human Services, which is responsible for overseeing the implementation of ObamaCare (despite a judge's recent ruling that the law is unconstitutional, we might add), will become the nation's first $1 trillion department by 2014. "In fact," says CNSNews editor Terence Jeffrey, "HHS already is costing American taxpayers more per year in inflation-adjusted dollars than the entire federal government cost back in 1965, the year President Lyndon Baines Johnson signed Medicare into law." This year's total is $909.7 billion, which is $170 billion more than the Department of Defense.

About his budget, Obama claimed, "Just like every family in America, the federal government has to do two things at once: It has to live within its means while still investing in the future. If your family [is] trying to cut back, you might skip going out to dinner, you might put off a vacation, but you wouldn't want to sacrifice saving for your kids' college education or making key repairs in your house. So you cut back on what you can't afford to focus on what you can't do without, and that's what we've done with this year's budget." Such a claim is absurd. House Republicans should lead the charge against it.

News From the Swamp: GOP Works to Cut SpendingHouse Republicans are doing some budget work themselves, debating legislation to fund the government for the remainder of this fiscal year, which ends Sept. 30. The GOP is considering measures that would reduce federal spending by $61 billion this year, including defunding the Corporation for Public Broadcasting and eliminating $450 million for a second engine for the Joint Strike Fighter, though other defense cuts failed. Republicans are also debating blocking funding for ObamaCare, and dethroned nine "czars" Thursday. Some conservative Republicans are pushing for an additional $20 billion in cuts.

Barack Obama issued a veto threat almost as soon as the House began debate on the cuts. The White House said that the GOP's plans "will undermine our ability to out-educate, out-build, and out-innovate the rest of the world." It's important to note that $61 billion is still a pathetically small piece of the $3+ trillion budget, so Democrats might want to tone down their cries of despair -- and Republicans might want to toughen up.

I am certainly no Obama fan but it is still a thrill to have a President come to one's graduation.

I saw Clinton once in West Palm Beach. As a Republican I felt out of place, but there is still a thrill - even for him.

I saw Reagan twice, once on the WH lawn and once in my home town across from my former High School in NJ. The Democratic mayor praised Reagan for bringing back a sense of pride to America. Reagan was so impressed a Dem would cross party lines to compliment him he took time to come to the city of Elizabeth to speak.

I saw GHW Bush play tennis with Chris Evert in Boca Raton in the early ninetees. He was pretty damn good.

In a back room at half-time at the Army-Navy game in '61 or '62 (I would have been 9 or 10 at the time) my father introduced me to President Kennedy. It was a big deal for me!!! Also, I got to shake the hands of lots of big generals and admirals.

Simple video from the Cato Institute that brings 60 billion down to the context of the deficit and the total spending. We are talking about cutting 1.6% off of spending that we just grew 100% in ten years. --------Federal Spending has grown 8 times faster than median income. http://www.heritage.org/BudgetChartbook/growth-federal-spending

One of my patients pointed out this article from a police officer. He points out that Republican governor Christie Whitman raided the pension funds of police and firemen in the 90's and that is the reason for today's shortfall.

BUDD LAKE, NJ – As a police officer in the state of New Jersey, I find myself unable to sit by while the current climate of public employee bashing continues under the misinformation fed to the public by the media and our current governor.

While I cannot comment on the teachers' retirement system, I can speak about the Police and Fire Retirement Fund (PFRS), and more specifically, how it has been mishandled by some of our elected officials. The truth should come out, and the public has a right to know how we got to where we are today.

Long before I became a police officer, the state of New Jersey enacted a law which required police officers and firemen to contribute a certain percentage of their salary into the state's "secure" pension fund. Throughout my 22 year career, I have paid 8.5 percent of my salary, as mandated by law, into this fund every pay period.

I was not given the option to place my 8.5 percent in an IRA or other investment fund. Every pay check since I was 25 years old had the 8.5 percent taken out of my pay and placed into the PFRS with the promise that the money would be there when I retired. By law, towns and municipalities were required to match that 8.5 percent.

By the time Gov. Christine Todd Whitman took office, there was over $100 billion in the fund. This meant that at the current rate of retirements, pension costs for police officers and firemen were funded at 104 percent, well into the future. This was a prudent and financially responsible plan that worked, and it provided security for the families of these men and women who risked their lives every day serving and protecting the citizens of New Jersey.

In no way was it heavily over funded or excessive. It covered the costs of promised retirements with a small cushion left over. It was at this time that Whitman stepped in. Gov. Whitman recognized the billions of dollars in our "secure" and "separate" pension fund, and she proceeded to raid that fund. Unknown and unannounced to the public, monies were indiscriminately withdrawn from the PFRS and used to pay for Whitman's tax cuts and to balance the state budget.

Billions of dollars were taken, and to make matters worse, the Whitman administration passed a law allowing towns and municipalities to no longer contribute to the fund. Over $3 billion in contributions were skipped over the next eight years, while the individual police officers and firefighters continued to have their 8.5 percent contribution taken from them and placed into the PFRS.

The state gambled for years, relying heavily on the returns from the stock market to cover the missing funds. Politicians misspoke on the campaign trail, touting the virtues of how their financial genius was able to balance their state and local budgets, and the public was lulled into a sense of false financial security.

But the small print in Whitman's bill was ignored. The funds they failed to contribute would have to be made up at a later date. The pension reprieve was temporary and their contributions would have to be paid back, just like any other loan. It was quietly suggested by the Whitman administration that towns set these contributions aside for when the state called to make good on them. It appears most towns and municipalities failed to heed this advice.

Governors (Donald) DiFrancesco, (James) McGreevy, and (Richard) Codey continued this trend, and all failed to call the towns and municipalities on their "loan" while the PFRS fund continued to dwindle down close to $66 billion. They remained silent. To bring this to light at this point would certainly mean political suicide, knowing that towns and municipalities would have to raise taxes to make up for their error in financial judgment and planning.

It wasn't until Gov. Jon Corzine took office that this trend was stopped, but unfortunately, the damage was done. Gov. Corzine made the call the governors before him were afraid to make. He advised the towns and municipalities that it was time to pay back the monies the towns had been given a temporary reprieve on. And the media jumped on this, printing bold headlines "Towns going broke over police and fire pensions."

This attention grabbing and misleading headline made it appear that your police and firemen were bilking the taxpayers dry, when the truth is totally the opposite. The politicians bilked your police officers and firemen dry and in the long run, the tax payers of New Jersey.

Towns and municipalities knew they were going to have to pay this money back and for them to insinuate otherwise is simply not true. Realizing the gravity of the situation, a new bill was introduced and passed into law. This allowed the towns to pay back the loan given to them by their public employees in increments; starting at 20 percent, 40 percent, 60 percent, 80 percent, and finally 100 percent each proceeding year.

Towns and municipalities continue to act as if they have been caught unaware and shocked by this entire process. The public is being told that payments for police and fire pensions are doubling, tripling and quadrupling and that the public employee system is out of control. What the public needs to know is that they are the victims of a mounting debt that was created by the Whitman administration and compounded by those following her tenure.

To blame your public employees for the abuses of the pension system is ludicrous at best, especially when our elected officials are the ones responsible for raiding the fund and then enacting the legislation on how and when to pay it back.

Gov. Jim Florio recognized the financial hardship facing the state of New Jersey and proceeded to raise the state sales tax to 7 percent. This helped spell political suicide for him, and Gov. Whitman was not going to make the same mistake. She repealed the 7 percent, dropping it back down to the 6 percent, knowing full well this money would have to come from somewhere. Her solution was to raid the Police and Fire Pension System, allowing her to balance the state budget and give the false appearance that all was fiscally sound under her watch.

Our current governor, facing the same financial crisis of those going before him, has chosen a similar route, but one with a more vilifying tone. He has again found the same victim: Your public employees. When asked about the pension situation in the state of New Jersey, Gov. Chris Christie replied "I wasn't going to put $3 billion into a failing pension system. We need pension reform. I passed some already for new hirees, and this fall we are going after the current employees and pension reform and benefits because we are broke."

Nowhere does he mention how the public employees had already bailed out this state years before, and now he is focused on "going after" the current employees to fix a mess created and compounded by politicians. To say otherwise for him would be political suicide should he aspire to higher political office, and as most of those before him, he is not about to risk his future. Rather, he would gamble on the future of those men and woman and their families who have served this state with honor and integrity.

The principals of the pension system are not broken, Mr. Governor. What is broken is the manner in which the politicians have treated and abused it. Yes, the system is failing now, but not because of your police officers and firemen. As of 2009, the pension fund should have assets of $112 billion to meet its obligations, yet it is currently sitting at $66 billion.

It is the largest unfunded liability in the country. New Jersey is the first state ever to be charged with fraud by the Securities and Exchange Commission, and Gov. Christie, strangely, has no comment on this. Yet he continues his rhetoric on the evils done to us by our police officers and firemen, ignoring the truth and lambasting and vilifying us at every turn.

As the saying goes, "Politics has no shame when it comes to preserving your place in office. Why let the truth get in between a good, attention grabbing headline?"

The system is on the brink of collapse, and continued arrogance and mudslinging will not fix it. The truth is what it is, Mr. Governor, and there is no getting around that. Politicians put us in this mess for their own political gain, not our public employees, as you would like the public to believe. You know this and need to stop ignoring the facts. How we deal with it from here is the measure of each of our character and integrity. I know the public is smart enough to recognize this and I hope that you are too. Long after you are gone, we will still be here, protecting and serving as we always have. In the end, all we have left is our name. Let's hope yours is remembered for your integrity and not for what you have slung so far in your race for political aspiration. I challenge you to do the right thing, as so many police officers and firemen strive to do every day for their families and the citizens of New Jersey.

54 Republicans would not support the latest continuing resolution, so it was constructed to pass with the support of 85 Democrats. Also had to be something the Senate would also pass in order to succeed in not shutting down the government, so it continues funding for Obamacare, Planned Parenthood etc. - for 3 weeks.

Perhaps this was the wrong time for real confrontation and potential shutdown with Japan in crisis needing our help and while we need to also to dither and then focus on Libya.

I like Sen. Rubio's explanation of his willingness to vote no. Asked repeatedly if he was willing to vote to shut the government down if the bill didn't contain this or that reform, he refused to accept the premise. He was sent there to enact reform and he stands ready and willing to vote yes for responsible funding of the government. It is the other side talking about a willingness to shut down for perceived political gain.

My conclusion is that nothing good has happened in these 2 continuing resolutions except to schedule the unaddressed questions to come right back up to be resolved by April 8.

Within 3 weeks, I will either be reasonably impressed with real progress on spending reform (doubtful) or be calling loudly for new leadership in the House.

Thank you GM. Part of winning is to quit giving up the ownership of the language and the terms of the debate. The deficit problem and the debt problem are both measured in the trillions, not billions. Not remotely similar even though they rhyme. And the only time frame worthy of discussion if you are an elected official is the rest of your term, not 10 year budgets or 30 year goals. These cuts are $0.006 trillion (assuming they are cuts at all). Significant maybe, maybe not, but let's call them what they are.

My congressman released the following statement "...after the House of Representatives passed $6 billion in spending cuts..."Today, my colleagues and I took another step forward in curing Washington’s spending problem and removing the barriers to job creation...”----Now try that again in English. 'After passing spending cuts of $0.006 trillion out of a $1.2 trillion gap, conservative Rep. xxx said he was very pleased with himself and expected to keep moving forward into key committee assignments and leadership positions by caving on all principles including the principles of 2nd grade arithmetic.' - Closer to the truth but doesn't sound as impressive.